“Some good news for once.”
That was the verdict from the latest BusinessLDN economic briefing in collaboration with the Bank of England hosted by Gateley earlier today, just as news of the surprisingly strong third quarter GDP data was breaking.
They key question on everyone’s mind: does a surprisingly resilient economy mean that resilience is set to continue, or do the headwinds eventually wear you down – meaning you are resilient right up until the point when you’re not?
The fact that the Bank raised rates to 4%, the first increase for three years, was totally expected and priced in by financial markets. The detail of the vote, with all MPC members voting for a rise was perhaps more of a surprise.
The Bank carefully watches the second-round effects of inflation to see if it is becoming embedded, and the encouraging news is that so far at least these seem to be increasing only gradually.
The Bank is also monitoring wage inflation closely, with a sense that there might be less slack in the labour market than previously thought. With the majority of pay settlements taking place in either January or April, it will be interesting to see if a backdrop of rising inflation influences these settlements in 2027, or whether the 3.6 / 3.7% average private sector wage increase that we’ve seen in 2026 also holds into next year.
It’s hard to get away from talking about AI. It dominates conversations about the London economy, much more so than in other regions of the UK, with big implications for the labour market – both in terms of wages in the scramble for data scientists and AI talent, as well as the potential for automation and the effects on jobs.
AI is also partly behind the K‑shaped economic story that is emerging, with professional services and tech forging ahead, while construction and housing struggle.
As for the mood in the room, our Slido poll revealed:
- 50% think that demand will broadly stay the same in 2027 as it has been this year
- 55% are holding steady on any hiring decisions
- 53% are targeting pay awards at under 3%, with a further 30% aiming in the region of 3 – 4%
Many thanks to Lai Wah Co at the Bank of England, to Richard Healey for his ‘state of trade’ remarks and all of his colleagues at Gateley for hosting us and to Muniya Barua for expertly guiding the discussion.